Concerns are growing over the rising cost of homeowners insurance

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The rising cost of homeowners insurance is weighing more heavily on American homeowners and buyers, according to a survey published Wednesday by Mphasis Digital Risk, a technology services company serving the residential real estate lending industry.

The nationwide survey received 1,634 responses from a pool of homeowners and non-homeowners.

The vast majority of respondents (90%) expressed concerns about rising homeowners’ insurance costs, while 27% reported that they are considering moving to a different state to get away from the ever-increasing insurance costs.

In addition, 57% of respondents said they would not buy a home in an area prone to frequent natural disasters, even if they were offered subsidies or tax credits. More than half of the respondents (53%) also reported that they would move to a higher-tax state for better weather, while 42% reported that they would also move to a higher-tax state to cut down their potential exposure to natural disasters.

As reinsurance costs and the costs to rebuild have risen, many insurers have either stopped issuing new policies or drastically increased premiums in natural disaster-prone states like California and Florida.

Over the past 18 months,  seven of the 12 largest insurance companies by market share in California have either paused or restricted new policies in the state, highlighted by the departures of State Farm and Allstate in early June 2023.

For those homeowners who have an existing policy with State Farm, the insurer announced that it would be raising premiums by an average of 20% statewide, according to a report from the San Francisco Chronicle. Due to these departures and price hikes, the California FAIR Plan, the state’s insurer of last resort, has seen enrollment double over the past few years.

In Florida, the departure of many insurers, as well as reinsurers, has resulted in Floridian homeowners to pay an average of nearly $4,000 a year in insurance, which is nearly three times the U.S. average, according to estimates from the Insurance Information Institute. In some instances, homeowners have seen their homeowners insurance costs more than tripled.

While these challenges are certainly impacting current homeowners in these states, the survey found that they are also impacting those who are considering moving to the states. Over three-quarters (77%) of respondents reported that insurers pulling out of a state or charging exponentially more for insurance in that state would have a “significant” impact or “make them think twice” about moving to that state.

Despite the insurance concerns in Florida and California, tornadoes were the top natural disasters respondents were concerned about impacting their property value at 46%, followed by flooding at 45%, hurricanes at 42%, and landslides at 20%.

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